It is difficult to square business pessimism with the available evidence of growth. Car sales were up in Q1, and Society of Indian Automobile Manufacturers (SIAM) has projected these to rise by 12-15 per cent this fiscal. Commercial vehicle prices are going up, and SIAM expects sales of both commercial vehicles and two-wheelers to rise 12 per cent this year. Both output and sales of cement were up 24 per cent in Q1, reflecting a rise in construction activity; and in its wake aluminium prices have been hiked. These are not flashes in the pan. The April index of industrial production showed strong growth in capital goods (20 per cent) and consumer durables (19 per cent). There has been a revival ofinvestment demand, and consumer demand for durables has looked up. True, growth in consumer goods is lagging at four per cent but chances are that demand for these will soon rise after last year's excellent agro output. And coming kharif harvest bodes well. However, as of now, growth impulses are being transmitted by capital goods via durable consumer goods to the industrial economy. An extraordinary feature of the current economic scenario is low inflation. The Kargil operation has not induced inflationary expectations. True, prices of industrial goods are rising selectively, but that is in response to demand. Prices may yet rise if the demand for consumer goods bounces; even so, inflation will remain at a comfortable single digit rate.